UPDATE 1-Brazil retailer GPA posts stronger profit on cost discipline

Tue Apr 29, 2014 8:42pm EDT

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(Adds details of earnings)

SAO PAULO, April 29 (Reuters) - Brazil's biggest retailer, GPA, posted a higher first-quarter profit on Tuesday as its strategy of lower prices and tighter cost discipline bolstered earnings.

Net income for the quarter rose 23 percent from a year earlier to 338 million reais ($152 million), according to a securities filing, climbing nearly twice as fast as sales in the period.

The results showed a more aggressive pricing strategy under the control of French group Casino is already yielding results, winning market share while boosting operating profit, especially in home furnishings unit Via Varejo.

Lower prices have helped to win customers amid weaker demand linked to high inflation in Brazil. That meant sacrificing GPA's gross profit margin, or sales minus the cost of goods, which fell 0.5 percentage points for Via Varejo and 1.7 percentage points in the food retail division.

Still, the group compensated by clamping down on operating costs, which rose just 2 percent, while net revenue increased nearly 12 percent. General and administrative expenses fell 14 percent as the group thinned its management ranks.

Earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, rose 22 percent to 1.05 billion reais.

($1 = 2.23 Brazilian reais) (Reporting by Brad Haynes; Editing by Bernard Orr and Steve Orlofsky)

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